Ryan Block was kind enough to write a very well done article on the iPhone. This review touches on many different aspects, but does focus a considerable amount on the touchscreen interface. He highlights the fact that the screens are not consistent in look nor usage. Given that the iPhone is the first consumer multi touch device, it is easy to forgive Apple for not getting it exactly right on the first try, no one argues that they got very close. It does highlight however the challenges in creating a touch interface.
The game for designers and developers gets changed dramatically when dealing with touch, especially multi touch. Developing something for use with a mouse/keyboard is easy, it has (mostly) all been done before. You want to select some letters, take the accurate mouse and highlight the selection. From all accounts, this very simple feature is missing on the iPhone, and it could be for a number of reasons, from oversight, to time, to the fact that a finger is not a good tool for selecting a few letters with.
Each iteration of touch technologies will improve on this problem, just as each iteration of hardware/software improved the mouse/keyboard. We feel there is no doubt that touch/multi touch will become a mainstay technology, but like any new and highly disruptive technology, there continual advancement, especially in the beginning stages.